diff --git a/src/auxpow.cpp b/src/auxpow.cpp
index 4994b9a02..e4ab63341 100644
--- a/src/auxpow.cpp
+++ b/src/auxpow.cpp
@@ -104,13 +104,13 @@ bool CAuxPow::Check(uint256 hashAuxBlock, int nChainID)
     return true;
 }
 
-CScript MakeCoinbaseWithAux(unsigned int nBits, unsigned int nExtraNonce, vector<unsigned char>& vchAux)
+CScript MakeCoinbaseWithAux(unsigned int nHeight, unsigned int nExtraNonce, vector<unsigned char>& vchAux)
 {
     vector<unsigned char> vchAuxWithHeader(UBEGIN(pchMergedMiningHeader), UEND(pchMergedMiningHeader));
     vchAuxWithHeader.insert(vchAuxWithHeader.end(), vchAux.begin(), vchAux.end());
 
     // Push OP_2 just in case we want versioning later
-    return CScript() << nBits << nExtraNonce << OP_2 << vchAuxWithHeader;
+    return CScript() << nHeight << CScriptNum(nExtraNonce) << COINBASE_FLAGS << OP_2 << vchAuxWithHeader;
 }
 
 
@@ -125,7 +125,8 @@ void IncrementExtraNonceWithAux(CBlock* pblock, CBlockIndex* pindexPrev, unsigne
     }
     ++nExtraNonce;
 
-    pblock->vtx[0].vin[0].scriptSig = MakeCoinbaseWithAux(pblock->nBits, nExtraNonce, vchAux);
+    unsigned int nHeight = pindexPrev->nHeight+1; // Height first in coinbase required for block.version=2
+    pblock->vtx[0].vin[0].scriptSig = MakeCoinbaseWithAux(nHeight, nExtraNonce, vchAux);
     pblock->hashMerkleRoot = pblock->BuildMerkleTree();
 }
 
diff --git a/src/rpcmining.cpp b/src/rpcmining.cpp
index 4103e7f4c..55b51a556 100644
--- a/src/rpcmining.cpp
+++ b/src/rpcmining.cpp
@@ -763,7 +763,8 @@ Value getworkaux(const Array& params, bool fHelp)
 
         RemoveMergedMiningHeader(vchAux);
 
-        pblock->vtx[0].vin[0].scriptSig = MakeCoinbaseWithAux(pblock->nBits, nExtraNonce, vchAux);
+        unsigned int nHeight = chainActive.Tip()->nHeight+1; // Height first in coinbase required for block.version=2
+        pblock->vtx[0].vin[0].scriptSig = MakeCoinbaseWithAux(nHeight, nExtraNonce, vchAux);
         pblock->hashMerkleRoot = pblock->BuildMerkleTree();
 
         if (params.size() > 2)
@@ -859,9 +860,10 @@ Value getauxblock(const Array& params, bool fHelp)
             pblock->nTime = max(pindexPrev->GetMedianTimePast()+1, GetAdjustedTime());
             pblock->nNonce = 0;
 
-            // Push OP_2 just in case we want versioning later
-            pblock->vtx[0].vin[0].scriptSig = CScript() << pblock->nBits << CScriptNum(1) << OP_2;
-            pblock->hashMerkleRoot = pblock->BuildMerkleTree();
+            
+            // Update nExtraNonce
+            static unsigned int nExtraNonce = 0;
+            IncrementExtraNonce(pblock, pindexPrev, nExtraNonce);
 
             // Sets the version
             pblock->SetAuxPow(new CAuxPow());